John Stern: Sure, Gerard. I’ll start. First of all, just to give an update on the unrealized loss. So from a positive standpoint, part of the hedging activities that we do that I just talked about in prior questions, really help here because we had — even though rates went up 30 basis points, 40 basis points throughout the quarter, our AOCI was fairly neutral. So the impact to the AOCI from the investment portfolio and pension right now is about 220 basis points versus the 10.0 that we have on common equity tier 1. You’re right, the Basel III endgame and all those sorts of things, that along with, I would call, CCAR results for us, are two important milestones we need to see before we make any grand declarations on what our capital ratios will be going forward.
In the meantime, we’ll continue to build our capital levels. And what we’ll also do is focus on our returns. Obviously, the dividend is a large priority. Additional priority is investing in the company. And so we’re pausing on share repurchases at this time as we build the capital. Over time, that will normalize back to kind of where we were. But this is kind of that transitional period that we’re in.
Gerard Cassidy: Very good. And coming back to — stepping back for a moment. Now the Union Bank, I assume is fully integrated. And obviously, that has been your focus since that acquisition. Can you share with us your thoughts about de novo expansion. You had that expansion down in the Charlotte area. Is there more to come now that, again, the acquisition is behind you? What’s your thoughts there as you look out over the next 12 months to 24 months?
Andrew Cecere: Yes, Gerard, we’re focused on building our core customer base and deepening the relationships with the customers we have through those set of products and services that we offer. We have — we do that through a number of mechanisms. One of them is through our branch system, one of them is through our relationship managers and working together. And that de novo effort is doing well. We also have partnerships with State Farm, which increase our distribution base. So we’ll continue to look at all those levers, but the bottom line is that we continue to focus on more customers, deeper relationships across the diverse set of businesses that we have. And a lot of the opportunity Gerard, is providing more services to customers who already are customers of U.S. Bank could benefit from some of the other products and services that we offer.
Gerard Cassidy: And Andy just a quick follow-up on the deepening the customer relationship that you just identified. When it comes to your middle market commercial or your core commercial account, if they only have a loan relationship versus one of your preferred accounts that have multiple relationships, that deepening you just mentioned, what kind of profit differential would you estimate there is between a customer that only has a loan versus your customer that has multiple products?
Andrew Cecere: It’s significantly higher. The more relationships, the higher the return, the more revenue, certainly. So if they have a loan only versus a loan plus deposit plus treasury management plus commercial products plus payments, it all adds up.
Gerard Cassidy: Yes. No, I agree. Okay. Thank you. Appreciate it.
Andrew Cecere: You bet.
Operator: [Operator Instructions] Your next question comes from Matt O’Connor with Deutsche Bank. Please ask your question.
Matt O’Connor: Good morning.
Andrew Cecere: Good morning, Matt.
Matt O’Connor: There’s obviously a lot of puts and takes, like as you think about the net interest margin over time. But we’ve seen a number of banks put out kind of this medium-term NIM target. And wondering if you have any thoughts on what a more sustainable NIM is for you guys. You talked about the securities kind of cash flowing $3 billion. I don’t know if there’s any kind of underwater swaps that are chunky and roll off. But I guess the question is, what do you think about NIM kind of medium term versus where you are right now?
John Stern: Yes. I’ll start here. Matt, in terms of the net interest margin, it’s going to obviously track net interest income over time, but it may bounce around some of the drivers of that, obviously, could be some of the things you just mentioned, the asset churn on the investment portfolio, the creep and on deposit costs and things like that. The cash levels and liquidity mix and things of that variety can also drive it as well. So we don’t really have a call or a base of here’s where our net interest margin. We’re more focused on net interest income.
Matt O’Connor: And then are there any — again, the securities book, you’re pretty clear on the cash flow there, and I think that’s fairly long duration from a cash flow perspective. Any swaps that we should be mindful of that could go either way looking out the next couple of years?
John Stern: I’m sorry, Matt, I didn’t.
Andrew Cecere: Swaps. So we again — go ahead.
John Stern: The swap activity that we have. Yes. So just as a — our hedging — while we’re very active in our hedging activities, we — there’s really no fundamental change. We continue to focus on pay-fixed- swaps that have — that hedge the investment portfolio. Obviously, we took some off that impact if that is a temporary thing. We still have well over 30% or well over a third actually of our risk hedged on the securities book. And then we have been adding receive fixed swaps as well. Some of that spot, some of that forward starting depending on the nature as the curve has come up here, and the curve has flattened and higher, that’s an excellent opportunity for us to add some protection for the downside if and when that does occur. And all that adds up to be kind of a net neutral interest rate risk position that we’re in.
